Friday, November 19, 2004
How to Tell When Legislation Works
A sure sign it works is when the people most directly affected by it whine, bitch and yowl loudly that it's too costly compared with the benefits (i.e., the government is forcing us to spend money to prove we're not stealing anymore).0 comments
Sarbanes-Oxley (officially, the Public Company Accounting Reform and Investor Protection Act of 2002) is one of those.
So, your basic Enron or Tyco types are now complaining about having to fly under the theft radar again. Which as we all know is just not fun or creative.
Here's a J.D. Powers survey of CFOs and corporate audit committee chairs, talking about the audit firms they use (and too often misuse and abuse) in a Sarbanes-Oxley world.
You'll be SHOCKED ("SHOCKED!" says Wolf) to learn that the very people it was created to hobble and shackle are complaining bitterly about the costs of being hobbled and shackled. Gosh!
The very corporate executives, positions and transactions that desperately needed oversight are now upset at the limits of their very own oversight bill.
"Such bad food—and such small portions! Where's my lawyer?! No, forget my lawyer! Where's my lobbyist?!!"
Assume the move to kill this bill will move to the campaign-contributor front burner within the next couple of months. They spent just too much money on this Bush campaign to have any shareholder protection or consumer fraud protection bills clogging up the ability of executives to skim much needed funds off the top of their bottom lines.
The Jesus Freaks think they were the hammer in this election. Come January, the major D.C. lobbying firms will quickly disabuse them of that notion.
J.D. Power and Associates Reports: Sarbanes-Oxley Takes Toll on Industry Confidence and Client Ratings of Accounting Firm Performance
Deloitte Ranks Highest among Firms Managing Clients with $1 Billion or More in Revenue
Grant Thornton Ranks Highest among Firms Managing Clients with Less Than $1 Billion in Revenue
November 2004 (Newstream) -- The stress of meeting the requirements for corporate financial accountability is taking a toll on confidence and client ratings within the accounting industry, according to the J.D. Power and Associates 2004 Audit Firm Performance StudySM released on November the 9th.
The study, which measures audit firm performance in the wake of the Sarbanes-Oxley Act of 2002, is based on interviews with 1,007 audit committee chairs and 944 chief financial officers.
The study finds a significant amount of angst among audit committee chairs and CFOs in the industry. Top management is concerned about the costs of implementing the extensive requirements associated with Sarbanes-Oxley compliance. Some auditors feel they are being stretched too thin because of additional audit requirements, which are impacting service levels. Also, audit committee chairs are feeling the pressure of increased accountability of the required financial reporting process. The results of this are low accounting firm performance levels compared to other business-to-business studies, and a decline in the confidence level of the accounting profession.
Furthermore, almost 9 out of 10 CFOs say the costs of implementing the new rules and procedural requirements of Sarbanes-Oxley are greater than the benefits of those changes. Confidence is also particularly low among CFOs, with just 44 percent expressing high levels of confidence in the accounting industry.
"In this period of tumultuous change in the accounting industry, Sarbanes-Oxley is heavily taxing the financial audit process," said Ron Conlin, partner at J.D. Power and Associates. "Many parties-from internal management to the board of directors to the auditors themselves-are struggling. The result has been, at least in the short term, relatively low ratings of the financial audit process and an erosion in confidence of the accounting profession."
Among the study's two audit firm performance segment rankings, Deloitte ranks highest among firms managing clients with more than $1 billion in revenue. Deloitte's strengths are in understanding the client's operations and its industry, the consideration of time and priorities, and handling difficult discussions.
Grant Thornton ranks highest among firms managing clients with less than $1 billion in revenue. Grant Thornton performs particularly well in understanding the client's operations and industry, in responding to requests and questions, and in trustworthiness. Another "second-tier" national firm, BDO Seidman, follows Grant Thornton in the rankings.
"It is clear that the Big Four puts most of its emphasis on its larger clients," said Conlin. "As a result, ratings of their performance, particularly among smaller clients, are lower. This represents a major opportunity for second-tier national firms such as Grant Thornton and BDO to gain clients looking for more personal attention, particularly among those currently utilizing a Big Four firm."
The study finds that audit firms receiving the highest ratings from clients are those that build strong relationships with audit committee members by emphasizing communication. Audit firms that are candid, able to explain difficult issues in a clear manner, and are willing to ask the tough questions about all aspects of business operations enjoy performance index scores that are more than 200 points higher than audit firms lacking in these areas.
posted by Gotham 2:38 PM
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